Mortgage Volume Up in Q2, but Buyer Sentiment is Waning
Written By: Joel Palmer, Op-Ed Writer
Homeowners originated an increasing volume of mortgage loans in the second quarter of this year, but buyers are starting to cool to the market potential.
The New York Federal Reserve’s second quarter report on Household Debt and Credit showed that mortgage balances shown on consumer credit reports stood at $9.78 trillion on June 30. This was a $63 billion increase from the first quarter.
During the second quarter, there were $846 billion in new mortgage originations that appeared on credit reports. This includes purchase and refinances. The New York Fed report stated that this was the highest quarter volume since the refinance boom in 2013.
People are more willing to take on mortgage debt than other types of consumer debt during the COVID-19 pandemic.
Balances on home equity lines of credit saw an $11 billion decline, the 14th consecutive quarterly decrease.
Credit card balances declined by $76 billion in the second quarter. The report stated this was the steepest decline in card balances in the history of the data and reflected the sharp declines in consumer spending due to the pandemic.
Auto loan balances were roughly flat in the second quarter, and originations declined between the first and second quarter.
Student loan balances increased slightly by $2 billion, but this was more of a result of increasing forbearances on federal student loans.
In total, non-housing balances (including credit card, auto loan, student loan, and other debts) saw the largest decline in the history of the report, with an $86 billion decline.
It remains to be seen whether the trend in mortgage originations will continue in the second half of the year.
Although record low mortgage rates will continue to encourage refinancing, there is lower sentiment among potential homebuyers.
Last week, Fannie Mae reported that its monthly Home Purchase Sentiment Index decreased in July after two months of advances. Consumers reported having a more pessimistic view of home buying while potential sellers are more optimistic.
“Not surprisingly – more than any other respondent groups – renters, 18-to-34-year olds, and households earning less than $100,000 think it’s a bad time to buy a home, which we believe suggests a less favorable outlook for first-time homebuying activity.”
The overall percentage of respondents who say it is a good time to buy a home decreased from 61 percent to 53 percent, while the percentage who say it is a bad time to buy increased from 27 percent to 38 percent.
The percentage of respondents who say it is a good time to sell a home increased from 41 percent to 45 percent, while the percentage who say it’s a bad time to sell remained unchanged at 48 percent.
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
